ESRD PPS contains the first major reform of dialysis payment policy in nearly 30 years. Provider, manufacturer, and government oversight groups are looking at the effect of PPS from their respective viewpoints. What remains unclear is the impact these changes will have on patient quality of care, particularly in the area of dialysis modality. Low use of peritoneal dialysis (PD) modality in the US compromises quality of care delivered to vulnerable ESRD patients and adds considerable cost to an already financially burdened Medicare ESRD program. The newly implemented ESRDS PPS encourages providers to increase PD use by adding financial incentives to adopt that modality as opposed to hemodialysis (HD). The goal of the proposed study is to determine the degree to which the ESRD payment reform has resulted in a subsequent change in PD use among US dialysis patients covered by the Medicare ESRD program. Research Questions. Specifically, we shall address the following two aims: 1. Examine the effects of ESRD payment reform on patient's choice of dialysis modality (HD versus PD) two years before and after the implementation of ESRD PPS. 2. Examine whether changes in dialysis modality choice are associated with patient sociodemographic and clinical characteristics, and/or dialysis facility characteristics. Ou study will specifically examine if there is a differential impact by type of facility organizationa status in response to ESRD PPS. Study Design. We propose to use United States Renal Disease System (USRDS) data from January 2009 through December 2012 to evaluate PD use in the two years before and two years after the ESRD PPS. An interrupted time series model, based on all incident ESRD patients initiating dialysis will be used to assess the impact of the ESRD PPS in the choice of dialysis modality. We will show trends in PD before and after PPS and assess whether changes in PD can be attributed to the ESRD bundle. Significance. Congress and the U.S. Government Accounting Office have called for close monitoring and assessment of both intended and unintended effects of ESRD bundling. Findings from this study will have broad public policy implications by providing insights into the effects of prospective payment on the care of vulnerable population of dialysis patients. The low PD use in the US has been a cause of concern and, adversely impacts patient quality of care, workforce participation, and, in some cases, outcomes. This study also extends beyond ESRD and has implications for design of capitated systems in other clinical areas, as performance-based bundled systems have emerged as the newest approach to mandate evidence-based medicine, enhance quality of care, and reduce costs.